HMRC Is Shite

Dedicated to the taxpayers of Britain, and the employees of Her Majesty's Revenue and Customs (HMRC), who have to endure the monumental shambles that is HMRC.

Monday, 17 August 2015

HMRC's £43BN Contingent Liabilities

HMRC's latest accounts contain a £42.8BN contingent liability, being its worst case estimate of the cost of defeat in its ongoing court cases relating to companies which believe that they have paid too much tax decades ago.

HMRC has been fighting multibillion-pound legal battles with dozens of companies such as Littlewoods, BAT and Prudential in highly complex court hearings in London and Luxembourg.

Chris Morgan, head of tax policy at KPMG, is quoted by the FT as noting that some of the key legal cases were coming to a head:

“There
could be tens of billions paid out by 2017-18.”

Many of the cases concern breaches of EU law, and do not involve tax
avoidance.

Bill Dodwell of Deloitte said:

“The biggest
elements of this have been a long time coming. The revenue has put up
the strongest possible fight.”

Therein lies the key element of the contingency, not so much the tax that would have to be repaid but the legal fees incurred by HMRC over the years in putting up a fight.

HMRC are sanguine about it, noting that it wins more than 80% of cases that go to
tribunal.

“We are required for accounting purposes to include an estimated
contingent liability figure of potential repayments of tax. There is no
question of this amount or anything close to this amount ever being
repaid as the figure is based on our losing every single case currently
being litigated, which is not going to happen.”

HMRC are most likely correct in what they say. However, what is worthy of note is that the liabilities have more than doubled over the past two years.

Tax does have to be taxing.

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